The relationship between an entrepreneur's background and performance in a new venture

Abstract

This paper examines how an entrepreneur's background relates to the performance of a new venture during the early stages, which has been a controversial issue in entrepreneurship research. This research is based on the data collected from 48 new start-up firms in Korea. The results of the analysis show that the relative profit tends to be high when an entrepreneur has more education and experience in the line of business, On the other hand, the profitability tends to be low when the entrepreneur has only start-up, managerial and high-growth experience without an educational background. A similar effect is shown in the growth of the firm, The positive effect is on growth if an entrepreneur has a professional knowledge of the product which is gained through previous work experience related to that product. If the entrepreneur has start-up, managerial and high-growth experience, bur lacks a knowledge of business, this results in a rather negative effect on the growth. The implications are that a good understanding of the product is essential to the success of the venture, whereas starting a new business with only limited previous experience related to the management dimension can be dangerous and may lead a firm to be unsuccessful. Copyright (C) 1996 Elsevier Science Ltd.